The secret to your app's success lies underneath the pricing strategy. Here's your see-through guide to help you formulate the right pricing model for your business model, generating its revenue and attracting users. See how!
To say the mobile app industry is growing would be an understatement.
An untold number of apps live in the Apple App Store and Google Play Store, and thousands of apps are launched every month. In a recent survey by Statista, it was found that people using their mobile are spending the majority of their time on apps. And this holds true across the globe!
As developers, we eat these stats like a horse.
Looking to hire skilled mobile app developers? Unlock the potential of your app idea with Your Team In India!
We have an ardour for apps and love to see our people cherish the joy of our apps. Honestly, we can research mobile trends and stats all day long - we love doing it - but numbers serve no purpose in business if we don't understand the why and how of them.
And today, we are shedding light on the "WHY" behind mobile app pricing strategy.
After all, mobile app pricing is the most difficult and critical aspect of mobile app development when opting for offshore software development. It is a must to choose the best pricing strategy if you want to get noticed in the app store.
However, there are many factors to consider when choosing the right pricing strategy for your app solutions.
According to a survey, it was found that around 30% or more of the traffic comes from mobile-based applications.
Therefore, it is crucial to choose the right pricing strategy for your business or even if you are planning to opt to hire developers.
So, before we go into the depths of pricing strategies for mobile apps, let's first dig into the basics.
- The right pricing strategy portrays value, convinces customers to buy, and nurtures confidence in your product.
- Paid users who convert from free tend to have higher NPS (Net Promoter Score), better retention and lower CAC (Customer Acquisition Cost).
- The most appropriate pricing strategy depends on your business nature, the product or service you offer, and the goal of your business.
What is a Pricing Strategy?
Pricing strategy refers to an approach that you can use to monetize the mobile app. The pricing strategy helps you grab a better hold of your position on the app store and earn profit from your app. Here, the pricing strategy also helps you to decide the success of the application.
So, in case you are incapable of deciding on a pricing strategy for your business, you may outsource app development or take the help of offshore software development services. It is because such service providers can provide you with a clear picture of all the features and will make you get acquainted with everything related to each strategy.
Recommended read: Top 15 Offshore Software Development Companies You Must Consider in 2023
Types of Pricing Strategies for Apps
So, before you settle on any of your mobile applications, you should know about the several types of application pricing strategies.
There are four types of pricing strategies, and they are:
Let's learn more about them in detail:
Free applications, as the name suggests, are completely free to download. Developers of such applications tend to earn profit from advertising. For example, Instagram, Facebook, and Twitter (these are a few examples of free pricing models in terms of mobile applications). There is another group as well that is free and is not dependent on just advertisements.
These apps are a little unique. The main aim of such mobile applications is to promote and get users to join a larger platform to generate revenue. But how do these apps make money?
After all, with two different tried and tested free pricing strategies. Which one you choose depends on your app's purpose.
The completely free apps usually act as add-ons to an already existing product or service. The main objective is not to make money directly from the app but rather to drive people to other passive revenue sources. For instance, an app may offer coupons to avail of a service on your website, driving people there for further nurturing.
There are a handful of companies that build free apps to facilitate customer service and also aid customer retention efforts. For example, the banking apps' objective is to make it easier and more convenient for customers to manage their finances on the go. With these apps, customers often receive additional offers, like increased credit limits or free overdrafts. Eventually, these services make money for the bank and also keep customers happy, even if the app itself is free.
Also, these apps act as a platform for ad revenue. Advertisers rent spaces within your mobile app, and people see those ads while using your app - but the app's still free to use.
For a better understanding, let's take a gaming app example. In gaming apps, you've probably used it with an in-app advertisement strategy.
Simply put, such applications include features such as discount alerts, coupon codes, and more to encourage users to take the desired actions inside or outside the app.
The idea behind developing such applications is to serve as a reference point and boost the marketing effort of your business. So, instead of making money from a mobile application through advertising, the developers offer an absolutely free app to highlight capabilities and get a hold of their potential users.
The Freemium app is an advanced alternative to the free application model. This approach is quite popular and is most commonly used by several Android and iOS app developers in the industry. Since the freemium apps are free to download, it carries limited features and related functionalities.
In-app purchasing opportunities are developed to establish a revenue system from such applications. This pricing model has three basic types, and they are mentioned as follows:
Here, the app is free to download. However, here the secret is that your users can only use the features by making in-app purchases. This approach is widely used in the gaming industry, where the users have to purchase certain currencies and weapons or upgrade themselves to additional levels.
The second model offers premium functionality on a trial version for a specific period. The idea behind this approach is to give end-users the vision and utility of your mobile application so that they can avail the services further.
The third approach involves applications with all the premium functionalities besides built-in advertisements. Here, the users are charged a small sum for an ad-free experience while using the app.
When things are done in the right way, a freemium app could act as an infinite source of revenue for businesses, but unlike free apps, freemium does wonder when the core objective is to attract a lot of users. Unlike free apps, your user will look for more from your app if they are expected to upgrade.
Whereas, for developers, the freemium model can sound like a heap of work, as there is a constant need for upgrades and improvements while managing user purchases. Providing genuine free features and not deluging users with upgrade notifications are two practical ways to keep a freemium app in a good state.
3. Paid Pricing Model
Well, this approach requires a one-time payment to gain access to the app. The paid pricing model is one of the least common models available in the market. So, when there is a free app available with almost similar functionalities, the competition becomes more fierce, and it is then a very risky battle to generate money for businesses.
Having that said, certain applications, especially for B2B niche applications, are specifically devised for targeted use. It makes this model a viable approach to go for. The paid Pricing model is the best for health, on-demand service providers, legal professionals, and more who really don't mind paying up to use an app designed only for them.
In layman's terms, users have higher expectations from a paid app compared to a free app. And, if you manage to attract a user, they are likely to be a long-term and loyal one. Also, they are more likely to rate and review your app - but that comes with a red flag; what if they don't have a good experience?
Additionally, brands or industry leaders having a lot of loyal customers can also afford advertising for their paid mobile applications that provide a unique value proportion.
Now, there is one more model that many companies are opting for these days- the Paid Subscription Model. You can find several companies following this revenue model, such as Netflix, Amazon, etc.
The paymium pricing approach is a mixture of freemium and paid pricing strategies. The users pay for the application and an extra amount fee to use additional functionalities or features. This pricing approach has great potential to generate huge profits, although it is not a generally used technique.
This pricing strategy is ideal when the value of the app is driven by its content. You need to present the advantages of not only getting the app to start with but also paying for additional tiers and features.
Games that you must be familiar with, like Minecraft, The Game of Life and NBA 2K18, do wonder with pricing strategies like Paymium. Their revenue flows from great marketing and strong reputations.
Though this is the least-picked pricing strategy but carries a great potential to offer amazing revenue streams for businesses, besides, it's advisable to stay transparent with users to avoid causing any repercussions.
Like freemium apps, paymium apps need constant involvement from the development team to stay up-to-date, relevant and engaging to entice users to come back and make purchases again. Here, unparalleled design quality, content and functionality are of utter importance.
This pricing model works best for music as well as social networking apps. If you have exciting content, updated functionalities, and user-friendly features, this pricing approach can help you gain momentum.
Last but not least, the subscription pricing strategy is worth considering. Here, users pay a monthly or annual fee (sometimes auto-renewal) to continuously use the app.
A handful of app categories using this strategy are dating apps, newspaper apps and even music streaming apps.
Though this model is not a great buzz at the moment, it's been gaining momentum in the last few decades. Apple, for example, is completely on board with subscriptions, even offering an incentive to companies that follow this pricing model.
Often, Apple gets a 30% fee from App Store purchases, but for subscriptions, they're offering to take half of the fee - a 15% subscription fee - once the subscription passes the one-year mark. This clearly means the objective for subscription apps is to evaluate users on board for longer than a year - which, to be honest, should be every app developer's goal.
Lastly, this pricing strategy portrays a chance to nurture long-lasting and loyal customers - as long as there are reasons to stick around - relevant updates and new features added periodically.
5 Tips To Choose the Best Product Pricing Strategies For Mobile Apps
Let's now look at the various product pricing strategies and things that you need to know to make the right decision for your mobile app. The strategies are:
Analyzing Human Behavior:
Human behavior plays a crucial role in determining the price of your product. The customer is putting up with the speedy stride in technology. It is the rise in consumerism that drives the scope of advancements. Customers today are well-informed, and they are always striving to make a conscious decisions.
For each product, there are various alternatives present in the market (that's how this industry works!).- So, how do you make a customer choose your product?
Well, that's simple, you must make sure that the observed value of your product is higher than the price. Customers should always feel that they are investing money in the right place. Therefore, tapping into this segment becomes much easier for you when your customer does have a reference point to start with. Also, before taking any decision, we tend to compare every service with the alternatives available around us and then assess them for their advantages or values.
Recommended read:How Much Does it Cost to Hire an App Developer in India?
Consider What Market is Willing To Pay:
The right pricing strategy must revolve around what the market can pay. To find that out, you should set your product on a testing period and see how the market responds.
A mobile app comes with a recurring revenue stream. Therefore, to stay ahead of your competition, you need to add several new functionalities and update them regularly. It is crucial to holistically view the recurring revenue model and not worry about the revenue or price per point.
Recommended Read: How Much Does it Cost to Create an App Like TikTok?
Analyzing a Product that User Desires:
A product should be developed to address the concerns of the user, and it must provide them with the solution they have been looking for. When you build something that your users are really looking for, it is easy to decide the price and fees accordingly.
So, look for the factors that can improve the value of your mobile app and related solutions- with a stellar design and amazing user journey.
To determine the mobile app development pricing models, you first need to understand what are the costs involved (Yes, even if you want to hire an app developer). This involves factors such as the value you offer, actual cost, and the greens you need to flourish it.
Recommended read:How to Find App Developers in 2023 – A Comprehensive Guide
Having a sound knowledge of the market trends is also crucial, and rolling out timely updates and adding features to improve the functionality is the key when opting for the competitive model.
Study the Industry to Identify the Competitive:
Industry-driven pricing is a great strategy to reach an optimum price point for your mobile app. Studying the industry to know more about your competitors helps you to analyze your user base. This can further help you to discover the opportunities where you need to put more effort.
So, understanding the market demand for an app or any other digital product and considering it from the customer's perspective helps you to settle on the right price.
It is, therefore, crucial to know what makes your product special and the value it holds when compared to your competitors in the market.
Paid Vs Free Apps:
Decide if you want your app to be free or paid, as it involves a couple of factors, such as the required amount of users. If you want to get a huge user base, it is a wise choice to go for.
With paid mobile apps, your users will expect more features, friendly navigation, and functionalities. However, they will surely only like paying sometimes when there is a new update rolled out.
The app pricing strategies and the relative techniques are not as simple as it looks. So, you just cannot think of an arbitrary number and hope that users like it. Instead, you have to pursue things holistically and understand how to determine the right price for a mobile app or any other digital product. Additionally, you should also think about the pricing and what you can implement to generate more revenue from the app right from the beginning.
It is essential to weigh in various factors before settling on a decision. Some of this involves the intent of the mobile application, your target audience, market demands, and the cost of hiring mobile app developers in India, Ukraine, the UK, the US, or any other part of the world.
Also, it is equally crucial to study the market and perform a sound competitor analysis for a sound competitive landscape. Always test your app at various price points. Additionally, always ensure that the value you are offering to the end user is greater than the price of the app. As pricing can be a little daunting, hopefully, this guide would have helped to understand things and put them right into the action, as per your business needs and mobile app development model.
Lastly, if you want to know more and are looking to hire developers in India, then feel free to contact us and share your details. We would be happy to help and happier to serve you.
Frequently Asked Questions
What is a better option for my paid mobile app - a free version or a trial period?
How do I determine the optimal price point for my mobile app?
What to consider when determining the best pricing strategy for mobile app development?